Opinion: Outsourcing of university non-core services not risky

A significant challenge the state has faced is steering the state’s financial ship through an ever-tightening fiscal channel.

Gov. Bill Haslam provided a vivid illustration a few years ago while speaking with a business group in East Tennessee, stating: “We’re shaving the sides of the boat off to get it through the canal.”

Total state funding costs are increasing at about 6-8 percent each year while state revenues have increased at less than 3 percent over the last couple of budget cycles.

Along with my Republican peers, I have followed through on a pledge to reduce the tax burden on our citizens, backing proposals to phase out the Hall Income Tax, and twice voting to reduce the sales tax on grocery food. These are good policies for our state that have also demanded new management practices that will reduce the costs of government.

Haslam’s fiscal management of the state over the past six years, supported by Republican legislators, has been excellent. Tennessee has made long-term investments in education and infrastructure, and has more than $800 million in our rainy-day, reserve fund. We have the lowest debt per capita of any state.

A guiding principle that Haslam has consistently demanded is that all state departments provide the best possible services at the lowest costs.

A response to that challenge was the creation of a facilities management (FM) program to improve service and reduce costs associated with the state’s massive real estate investments. That effort is now a national model that other states are racing to adopt.

After a competitive bid, a five-year FM program awarded to JLL in 2013 to manage about 10 percent of state properties. Today, this program is on track for $50 million in overall savings by 2018. JLL has improved service, customer satisfaction and reduced risk in state-owned office buildings and generated remarkable savings that assist the budgetary challenge framed earlier.

As former chairman and now vice chairman of the state’s joint Fiscal Review Committee, I’ve had a front-row view of this success. The National Association of State Procurement Officers and the National Association of Chief State Administrators have each recognized the Tennessee program for innovation and efficiency achievement over the past couple of years. Recently, officials from 15 states gathered in Nashville to explore Tennessee’s model and pursue their adoption plans.

Due to this success, the state has wisely advanced plans to offer the professional facilities model to other state agencies, including colleges and universities. State departments and higher education institutions will conduct analysis to determine savings and make business-case determinations on whether to leverage the state contract which was awarded to JLL after another competitive bidding process. The state has made the option more attractive by contractually requiring that JLL and its service partners retain all facilities management employees working in agencies or institutions that join the state contract.

Timing of this option is fortuitous. Recently, the University of Tennessee forecast a $122 million budget gap for its system campuses (Knoxville, Chattanooga, Martin and Memphis) by 2025. This is a gap that cannot be made up solely from tuition hikes and state appropriations.

This new contract option seems an easy call for UT leadership. Initial analysis by JLL and the state project that the UT system could save about $12 million annually, enough to address the current budget gap. Given that outsourcing of non-core services is commonplace on university campuses, such a step certainly is not risky.

It would also demonstrate to state taxpayers that our higher education leaders are open to new ways of fiscal management that minimize risk to curriculum or unduly rely on the checkbooks of students and families.

Mark White, R-Memphis, is a member of the House of Representatives in the Tennessee General Assembly.